Croatia:INA-MOL disputes over refineries closure decision by MOL

Published on 16. October 2014., SEE Energy News

Analysis of refinery operations of Ina, prepared in late 2012^th, was based on the short-term assumptions for 2013^th and in no case did not apply for a period of five years, Ina announced in response to media reports about the so-called “Ina secret study” according to which the Sisak oil refinery could operate positively.

From INA responded to the article in today’s Jutarnji list on “Ina secret study” from 2012^th, according to which “Sisak should not be switched for another five years.” “As long as Rijeka does not take the oil refining with the Croatian fields, Sisak will be in the plus”, it is the title of the article which also transmit the other media, which refers to “Ina secret study” from 2012^th.

From INA claim that the so-called “Ina internal study” represents business analysis prepared in late 2012^th for the purpose of discussion on the business plan for the coming year.

“In this sense, the analysis was based on short-term assumptions for 2013^th and in any case it could not be applied for a period of five years, as it also was stated in the announcement”, say in Ina.

They also claim that “predictions of the so-called “profitability” of Sisak refinery in the amount of nearly 40 million dollars were pulled out of context, because that amount represents the annual refinery margin, which is calculated before the profit calculating and does not include all costs”.

Also, they note that in the media titles was not specified, and it is evident according the material, that the “specified short-term predictions are associated with the prices of domestic oil, or lower than those that can be achieved in the market, which is a long-term unsustainable model that adversely affects the business exploration and production”.

From Ina state that processing quantity of 600,000 tons is sufficient for continuous operation of the refinery and increase of the capacity of oil processing cause additional losses.

“Due to the processing unprofitability, Sisak refinery has worked only occasionally for several years – for example, this year it was only two months ago, and last year five. Such business model, when in fact the Refinery is in the cold drive most of the time, continuously increases energy and maintenance costs, which are also not taken into account”, according to Ina statement.

In Ina point out that “the refinery business should be viewed as a whole, which, under these conditions of business brings significant operating losses of total EBIT 1, 1 billion EUR in the last three years and the first half of 2014^th“.

Also point out that the company made maximum effort to reduce losses of its refineries last year due to market conditions and excess capacity at the regional and wider European market.

“The markets of Croatia, Slovenia, Serbia, Bosnia and Herzegovina and Albania had a 35 percent greater refining capacity in 2013^th than the demand for petroleum products. Additionally, Ina faces a competitive import given that several million tons of import capacity is available to Mediterranean markets”, writes in the statement.

Despite numerous measures to improve the production efficiency and optimization, the negative trend could not be reversed, so the restructuring of refinery operations is crucial for Ina, and also the oil processing on that site that has the potential to ensure long-term sustainable refinery business, stand out from Ina.

They note that similar analysis and discussions were held 16 years ago, when the market conditions related to refinery operations were much more favorable. “Even then, the analysis pointed to the importance of sustainable economic operations of the entire company whose prerequisite was the optimization of processing capacities of Ina’s refineries, especially Sisak”, it was said in Ina statement.